Applications have been filed at two mainland stock exchanges for China’s first public real estate investment trusts (REITs) based on residential properties.
The move appears to have been spurred by financial officials anxious to inject fresh capital to revive the property sector, which has been hit hard by Covid lockdowns and government efforts to reduce the massive debts accumulated by leading developers such as China Evergrande.
Stock exchanges in Shanghai and Shenzhen each accepted an application for residential REITs backed by rental incomes from affordable housing, exchange filings show.
The launches will expand the investment scope of China’s REITs, which have been based on infrastructure projects such toll ways, logistics centres and sewage plants.
But officials at the Beijing exchange have no plans yet to allow REITs to channel money into commercial properties such as office towers and shopping malls, which are common REIT assets globally.
REITs are a collective investment scheme that sells shares in a trust that owns a collection of properties or infrastructure assets.
They can help China broaden funding sources for rental housing projects and help solve the problem of housing affordability, China’s securities regulator and its state planner said in a statement late on Friday.
“It will also help prevent and reduce major risks, and maintain stable and healthy development of the real estate market,” said the regulators, publishing rules for the issuance of rental apartment REITs.
China this week issued guidelines to expand infrastructure investment by freeing up capital locked in existing projects, and identified REITs as one of the tools.
Asset manager CICC Fund submitted an application for residential REITs to the Shanghai Stock Exchange, while Hotland Innovation Asset Management Co applied to launch a similar product via the Shenzhen bourse.
• Reuters with additional editing by Jim Pollard